The Use of Indexes for Trending in Engineering Valuation

Author(s)

Abstract

Three types of indexes are indicated in this write up namely cost, mathematical and catalog indexes. Cost indexes are used for trending in engineering valuation. A cost index is defined as a dimensionless number used to trend the cost of an item from one time period to another. It is also a ratio of the real price in a given time period against that of a selected base period multiplied by 100. Trending which is one of the methods used in engineering valuation is the application of an index factor to the historical cost of an item in order to estimate the current cost of the item and vice versa. This application is demonstrated in this article. Additional examples on trending are indicated in the supplementary exercises at the end of the article. Indexes are meant to serve as guide and should not be used if more reliable methods are available. Appraisers must therefore exercise caution and good judgment in their use.

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